TOWER SEMICONDUCTOR LTD - 928876

TOWER SEMICONDUCTOR LTD.

AND SUBSIDIARIES

UNAUDITED CONDENSED INTERIM

CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2026

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

INDEX TO UNAUDITED CONDENSED INTERIM

CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2026

	Page

BALANCE SHEETS	F - 2

STATEMENTS OF OPERATIONS	F - 3

STATEMENTS OF COMPREHENSIVE INCOME	F - 4

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY	F - 5

STATEMENTS OF CASH FLOWS	F - 6 - F - 7

NOTES TO FINANCIAL STATEMENTS	F - 8 - F - 9

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollars in thousands)

	June 30,		December 31,
	2026		2025
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	231,188	$	235,369
Short-term deposits		1,250,225		916,541
Trade accounts receivable		202,871		222,795
Inventories		244,356		256,855
Other current assets		57,330		78,062

Total current assets		1,985,970		1,709,622

PROPERTY AND EQUIPMENT, NET		1,649,600		1,463,056
INTANGIBLE ASSETS, NET		886		1,530
GOODWILL		7,000		7,000
OTHER LONG-TERM ASSETS, NET		127,980		141,082

TOTAL ASSETS	$	3,771,436	$	3,322,290

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Current maturities of long-term debt	$	16,921	$	28,112
Trade accounts payable		122,605		123,915
Deferred revenue and customers' advances		176,038		25,581
Employee related liabilities		74,398		70,299
Other current liabilities		14,249		15,840

Total current liabilities		404,211		263,747

LONG-TERM DEBT		124,775		133,406
LONG-TERM CUSTOMERS' ADVANCES		145,368		1,932
EMPLOYEE RELATED LIABILITIES		10,186		6,448
OTHER LONG-TERM LIABILITIES		15,524		12,174

TOTAL LIABILITIES		700,064		417,707

TOTAL SHAREHOLDERS' EQUITY		3,071,372		2,904,583

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	3,771,436	$	3,322,290

See notes to the consolidated financial statements.

F - 2

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars and shares in thousands, except per share data)

	Six months ended June 30,						Three months ended June 30,
	2026			2025			2026			2025
REVENUE	$	873,710		$	730,231		$	460,079		$	372,061

COST OF REVENUE		624,987			577,034			322,307			292,035
GROSS PROFIT		248,723			153,197			137,772			80,026

OPERATING COSTS AND EXPENSES:
Research and development		47,099			39,590			23,569			19,418
Marketing, general and administrative		46,769			40,844			23,913			20,743
		93,868			80,434			47,482			40,161

OPERATING PROFIT		154,855			72,763			90,290			39,865

FINANCING AND OTHER INCOME, NET		25,420			24,985			15,902			14,387
PROFIT BEFORE INCOME TAX		180,275			97,748			106,192			54,252

INCOME TAX EXPENSE, NET		(22,091	)		(12,439	)		(15,573	)		(8,660	)
NET PROFIT		158,184			85,309			90,619			45,592

Net loss (income) attributable to non-controlling interest		(2,383	)		1,384			150			959

NET PROFIT ATTRIBUTABLE TO THE COMPANY	$	155,801		$	86,693		$	90,769		$	46,551

BASIC EARNINGS PER SHARE:
Earnings per share	$	1.38		$	0.78		$	0.80		$	0.42
Weighted average number of shares		112,738			111,693			112,910			111,810

DILUTED EARNINGS PER SHARE:
Earnings per share	$	1.36		$	0.77		$	0.79		$	0.41
Weighted average number of shares
used for diluted earnings per share		114,340			113,218			114,427			113,282

See notes to the consolidated financial statements.

F - 3

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(dollars in thousands)

	Six months ended June 30,
	2026			2025
Net profit	$	158,184		$	85,309

Other comprehensive income, net of tax:
Foreign currency translation adjustment		(9,162	)		17,087
Unrealized gain (loss) on derivatives		(1,097	)		11,660
Change in employees plan assets and benefit obligations		(8	)		43

Comprehensive income		147,917			114,099

Comprehensive loss (income) attributable to non-controlling interest		57			(4,436	)
Comprehensive income attributable to the Company	$	147,974		$	109,663

See notes to the consolidated financial statements.

F - 4

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

(dollars and share data in thousands)

	THE COMPANY'S SHAREHOLDERS' EQUITY
										Accumulated			Foreign
	Ordinary		Ordinary		Additional			Cumulative		other			currency								Total			Non
	shares		shares		paid-in			stock based		comprehensive			translation			Accumulated		Treasury			comprehensive			controlling
	issued		amount		capital			compensation		income			adjustments			profit		stock			income			interest			Total
BALANCE AS OF JANUARY 1, 2026		112,621	$	450,905	$	1,373,643		$	274,319	$	4,704		$	(71,161	)	$	895,949	$	(9,072	)				$	(14,704	)	$	2,904,583
Changes during the period:
Issuance of ordinary shares upon vesting of RSUs		497		2,457		(2,457	)																					--
Employee stock-based compensation									18,872																			18,872
Comprehensive income:
Net profit																	155,801				$	155,801			2,383			158,184
Foreign currency translation adjustments														(6,722	)							(6,722	)		(2,440	)		(9,162	)
Unrealized loss on derivatives											(1,097	)										(1,097	)					(1,097	)
Change in employees plan assets and benefit obligations											(8	)										(8	)					(8	)
Comprehensive income																					$	147,974
BALANCE AS OF JUNE 30, 2026		113,118	$	453,362	$	1,371,186		$	293,191	$	3,599		$	(77,883	)	$	1,051,750	$	(9,072	)				$	(14,761	)	$	3,071,372
OUTSTANDING SHARES, NET OF TREASURY STOCK AS OF JUNE 30, 2026		113,031

See notes to the consolidated financial statements.

F - 5

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

	Six months ended June 30,
	2026			2025
CASH FLOWS - OPERATING ACTIVITIES

Net profit for the period	$	158,184		$	85,309

Adjustments to reconcile net profit for the period
to net cash provided by operating activities:
Income and expense items not involving cash flows:
Depreciation and amortization		166,499			148,864
Other expense, net		7,237			4,117

Changes in assets and liabilities, net:

Trade accounts receivable		19,186			(1,382	)
Other current assets		16,797			620
Inventories		9,857			(11,873	)
Other long term assets		8,978			63
Trade accounts payable		(2,990	)		(2,959	)
Deferred revenue		11,311			1,179
Employee related liabilities and other current liabilities		2,229			9,298
Long-term employee related liabilities		3,722			607
Other long-term liabilities		3,342			(4,414	)
Increase (decrease) in customers' advances, net		282,582			(12,908	)

Net cash provided by operating activities		686,934	(1)		216,521

(1) Includes an increase of $282,582 in customers' advances, net.

CASH FLOWS - INVESTING ACTIVITIES
Investments in property and equipment, net		(342,953	)		(222,093	)
Deposits and other investments, net		(330,000	)		16,470

Net cash used in investing activities		(672,953	)		(205,623	)

CASH FLOWS - FINANCING ACTIVITIES
Proceeds from loans		--			13,808
Loans repayment		--			(19,819	)
Principal payments on account of capital lease obligation		(15,693	)		(15,759	)

Net cash used in financing activities		(15,693	)		(21,770	)

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE		(2,469	)		4,271

DECREASE IN CASH AND CASH EQUIVALENTS		(4,181	)		(6,601	)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		235,369			271,894
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	231,188		$	265,293

See notes to the consolidated financial statements.

F - 6

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

	Six months ended June 30,
	2026		2025
NON-CASH ACTIVITIES:
Investments in property and equipment	$	51,111	$	38,518

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash received from interest, net during the period	$	20,170	$	12,365
Cash paid for income tax, net during the period	$	8,603	$	8,461

See notes to the consolidated financial statements.

F - 7

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF JUNE 30, 2026
(dollars in thousands, except per share data)

NOTE 1 - GENERAL

Basis for Presentation

The unaudited condensed interim consolidated financial statements of Tower Semiconductor Ltd. (“Tower” or the “Company”) as of June 30, 2026 and for the three and six months ended June 30, 2026 and June 30, 2025 include the financial statements of Tower and (i) its wholly-owned subsidiary Tower US Holdings Inc., the sole owner of: (1) Tower Semiconductor NPB Holdings, Inc., Tower Semiconductor Newport Beach, Inc., an independent semiconductor foundry, and its wholly-owned subsidiary Newport Fab LLC (Tower Semiconductor NPB Holdings, Inc., Tower Semiconductor Newport Beach, Inc. and Newport Fab LLC, collectively referred to herein as “TSNB”); and (2) Tower Semiconductor San Antonio, Inc. (“TSSA”); (ii) its 51% owned subsidiary, Tower Partners Semiconductor Co., Ltd. (“TPSCo”), an independent semiconductor foundry which operates two semiconductor facilities located in Tonami and Uozu in Hokuriku Japan), with the other 49% of TPSCo’s shares held by Nuvoton Technology Corporation Japan (“NTCJ”); and (iii) its wholly-owned subsidiary, Tower Semiconductor Italy S.r.l. (“TSIT”), incorporated in 2021 following the collaborative arrangement signed in 2021 with ST Microelectronics S.r.l (“ST”) with regards to ST’s 300 mm facility in Agrate, Italy.

The Company’s unaudited condensed interim consolidated financial statements are presented after elimination of inter-company transactions and balances and are presented in accordance with U.S. generally accepted accounting principles (“US GAAP”).

The unaudited condensed interim consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements of the Company as of December 31, 2025 and for the year then ended, including the notes thereto.

In the opinion of the Company's management, the unaudited condensed interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial position as of the dates presented and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected on a full-year basis.

F - 8

TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF JUNE 30, 2026
(dollars in thousands, except per share data)

NOTE 2 - INVENTORY

Inventories consist of the following as of June 30, 2026 and December 31, 2025:

Details	June 30, 2026		December 31, 2025
Raw materials	$	76,443	$	105,301
Work in process		154,876		144,373
Finished goods		13,037		7,181
	$	244,356	$	256,855

NOTE 3 - RECENT DEVELOPMENTS

On March 25, 2026, the Company and NTCJ entered into a framework agreement to implement a strategic restructuring of TPSCo’s business operations, under which Tower will acquire full ownership and operational control of the Uozu fab while the Tonami fab will remain within TPSCo, which will become a wholly owned subsidiary of NTCJ, for consideration of a $25,000 payment by NTCJ to Tower to be made on the closing date. The transaction is expected to close on April 1, 2027, subject to the satisfaction of customary closing conditions and receipt of applicable regulatory approvals. Under the new structure, Tower’s new wholly owned subsidiary in Japan (“TSJPN”) will own all Fab 7 (300mm) manufacturing production tools, and manage all Fab 7 operations, employees and business activities.

In March 2026, GlobalFoundries Inc. filed three lawsuits against the Company in the U.S. International Trade Commission (ITC) and the United States District Court for the Western District of Texas alleging infringement of certain of its patents. Thereafter, an additional lawsuit has been filed by GlobalFoundries in China with respect to alleged infringement of a Chinese patent which is a counterpart of one of the patents in the ITC case. The Company disputes these claims.

In July 2026, the Company announced its intention to expand its 300mm Silicon Photonics (SiPho) and Silicon Germanium (SiGe) capacity and capabilities in Japan with the support of the Government of Japan through cash grants that are expected to be received from its Ministry of Economy, Trade and Industry (METI). The plan consists of repurposing the Arai facility, formerly Fab 6 (a 200mm fab that ceased its operations in 2022), for 300mm Silicon Photonics manufacturing, maximizing the existing Fab 7 300mm output in Uozu, and a planned additional 300mm manufacturing facility that may be built adjacent to Fab 7, following signing and closing of related agreements with contractors and other service and equipment providers, obtaining necessary permits, finalizing METI grants terms and covenants thereto and other consents that may be required.

F - 9